Clive Palmer says the WA Government wrote and asked if we would apply for the tenement.

AAP: Lukas Coch

Western Australia's Mines Minister has asked for legal advice over the granting of exploration rights to Clive Palmer's company Mineralogy.

The private company made an application over a tenement south-west of Karratha in the Pilbara region in 2010.

At the time, the tenement was held by International Exploration, a subsidiary of Australasian Resources which is majority-owned by Mr Palmer.

International Exploration surrendered the tenement in 2011 and Mineralogy effectively took it over with two new applications which were granted last year.

Mines Minister Bill Marmion has instructed his department to seek legal opinion from state solicitors about the matter.

There is no suggestion from the Minister's office that anything wrong has occurred, rather the message is he wants to be clear on the facts before commenting.

It was prompted by media interest in an article in Fairfax newspapers.

That has resulted in the Mines Department releasing details on how Mineralogy may end up losing what it had gone to some lengths to acquire.

Mineralogy lodged a plaint, or application for forfeiture against the tenement E08/1555 on October 27, 2010.

It seems no alarm bells went off in the Mines Department when Mr Palmer's private company sought to seize exploration rights from a company that he had a majority shareholding in.

The department does not run checks on executives, board members or shareholdings as a matter of course, as issues are only explored when they are obvious or when there is a complaint.

In March 2011, E08/1555 was surrendered by International Exploration before a decision could be made on the forfeiture application.

Experts say unlikely Mining Act breached

There have been questions raised in the Fairfax report as to whether the Mining Act was breached during the process.

Sources who have spoken to the ABC say it is unlikely the Act was breached, because there are superseding elements of the legislation which come into play when a tenement is surrendered.

They have said things like this happen in Western Australia "all the time" to keep exploration rights alive.

There could be good reasons such as a need to raise funds.

Experts have expressed surprise though because they say they have never seen anything like this before.

They have put it down to the simple fact that, and they say this without being negative, that "Clive doesn't like to lose things".

There was a third party, Fortescue Metals Group, which put in an application for the ground covered by E08/1555.

Mineralogy formally lodged its own application and FMG never went ahead.

FMG has not responded to the revelations in Fairfax article.

Palmer says transaction a minor one

Mr Palmer's response has been that the article is not correct, without being specific.

He says the transaction was a "minor one" for his company and when applying for a tenement "it is the minister who decides who gets it".

Sources have told the ABC the Minister simply signs off and does not really decide, but Mr Palmer says the WA Government wrote and "asked us if we would apply for the tenement".

Those who know about such things from the government side say this was most likely a form letter or courtesy, rather than a specific request.

With native title clearances and other things, it took a year for the new tenements to be granted (E08/1555 effectively became two- E08/2271 and E08/2272) and Mineralogy got what it was after in March 2012.

There is no evidence that anyone complained or raised any issues during this time.

It appears there are some grey areas in the Mining Act which have never been tested because court time is often seen as wasted time by miners who would rather be digging stuff out of the ground.

Curiously, Mineralogy's tenements are now subject to forfeiture because the minimum spending requirements for the first year have not been met.

While it may seem on the face of it that this land may not be as productive as Mineralogy may have hoped, it clearly wants to hang onto it.

Mineralogy had asked the Mines Department for an exemption.

The request was refused last month and the Minister is yet to decide on what will happen. He could impose a fine.

Mineralogy has been contacted for comment on the potential for forfeiture, the second time in three years that the spectre has risen.